Service companies invest in personnel, equipment to meet increasing demand

Mella McEwen

Published 7:00 pm, Monday, March 12, 2007

A thriving oil and gas industry has stepped up demands on the service sector as operators work to complete new wells, recomplete existing wells and other wise maintain the nation's oil and gas wells.

Service companies responding to a Permian Basin Oil Report survey say they are significantly stepping up investments to meet demand for their services.

"We are keeping up with demand for our services by making additional investments in equipment and services through internal growth as well as by acquisition," said Midland-based Basic Energy Services. "In 2006, we spent approximately $130 million in capital expenditures and completed 10 acquisitions for approximately $130 million in consideration. We also have maintained extra personnel for training purposes to crew new equipment when it is delivered."

Key Energy said it is also making significant investments in people, training and equipment to keep up with demand.

"In fact, our 2007 capital expenditure budget should be another record year for Key and, despite continued strong demand for our services and solid growth in our man hours worked during 2006, we once again experienced improvements to our safety performance, which we believe is among the top in our industry. Collectively, we believe our significant investment in people and infrastructure is critical to providing quality and safe service to our customers."

For Halliburton, its personnel is key to meeting demand.

"At the current time we continue to hire personnel and focus on developing our current workforce to meet the demand of our customers," the company said. "This includes looking at different areas of opportunity for recruiting and training, both inside and outside the local area to increase our workforce. Halliburton is very interested in adding value to the local community by supplying a stable workforce in our local economy. We are currently adding resources to our established fleet to add capacity to handle the demands of our customer base. Halliburton will tie these resources with new technologies that are being developed to create better solutions for our customers to drill, complete and produce wells in the Permian Basin. These new technologies will result in a time and cost savings for both Halliburton and the customer."

New technologies helped drive some of Basic's acquisitions last year, company officials said. Last March, the company noted, it acquired the operating assets of G&L Tool to gain entry into the rental and fishing tool market and the company has subsequently expanded its rental and fishing tool operations with three additional acquisitions. It also expanded its pressure pumping capacity with the agreement last month to acquire the outstanding stock of JetStar Consolidated Holdings, which operates pressure pumping equipment in Texas, Oklahoma and Kansas.

Basic officials said they also continue the program of acquiring newbuild rigs begun in October 2004, receiving 66 newbuild rigs out of a total 120 planned under the program, and expects to receive the remaining 54 throughout this year. The company also added 169 trucks to its fluid services fleet, bringing the total to 646 trucks. Plans for this year are to purchase new equipment to build on all business lines and take advantage of opportunities for acquisitions to fill in its footprint or roundout its capabilities.

Key Energy, likewise, is continuing a rig manufacturing program, will make additional investments in rig technology and is investing new capital into its cased-hole electric wireline business with hopes of bringing that service to Permian Basin customers this year.

With the new year, Key officials expect demand for all of its services to be strong and stable "as long oil remains above $50.

"We are optimistic for 2007 and are encouraged by the strong returns being generated by our customers," the company said.

Halliburton said it sees high demand for all product service lines, while Basic said business conditions for this year are dependent on how gas storage volumes end up after the winter season.

"Availability of labor will continue to be an issue, albeit probably not as severe as it was in 2006," Basic officials said, noting that recruitment and retention of personnel was challenging last year, which brought about a sizable increase in wages from 2005. This resulted in rate increases to its customers last year. To recruit personnel, Basic was active locally, worked with community colleges around the country and attended military job fairs.